Local Issues: Five or One – Value Planning

In November 2016 it was announced that the five main water providers in Kelowna had agreed

… on a statement of principles and terms of reference for a value planning process that will allow for an independent third-party to review all relevant documents and information that would inform the development of a new, integrated water system for the region over time (news.gov.bc.ca).

A consultant was hired, stakeholders and experts recruited, and a value planning workshop was held January 9-13.  The value planning exercise started from the 2012 Kelowna Joint Water Committee integration plan, and looked for ways that water services could be enhanced and/or costs reduced.  The report on the value planning exercise was released on the 27th of February.

The analysis recognizes one of the things that I pointed out in an earlier posting, that the cost of delivering water around Kelowna might offset the advantages of centralized treatment.  They identified a solution that takes advantage of the scale economies of centralized treatment, and the opportunities to avoid some treatment costs if high quality source water is used, while using gravity to move water some of the time.  That solution is to use Mission Creek as much as possible.  Mission Creek water is, for much of the year, of sufficient quality to require minimal treatment (i.e. no costly filtration), and when Mission Creek water is not of that quality, the plan sees the lake intakes being used.  Therefore, by integrating the system and taking advantage of these two sources – Mission Creek and Okanagan Lake – the cost of pumping water can be kept down, and the cost of treatment kept down as well.

The first phase of the project will be to build infrastructure to bring Mission Creek water to the residential areas presently supplied by South East Kelowna Irrigation District (SEKID), avoiding installing the wells that were originally seen as a solution to water quality issues faced by SEKID.  It is acknowledge that this will be more costly than the wells, but in the long run as Mission Creek becomes an important source for the entire city, would be an appropriate investment.

Good job to the value planning consultant for identifying this option.  However, on my first reading of the report, I am left with some questions.  Here are a few of them and my thoughts.

1) The Missing Water Providers

The value planning exercise includes only SEKID and the city.  The remaining three opted out, even after agreeing to the original guiding principles mentioned in the press release.  Something happened to the goodwill that was in place in 2012, when all were working together.  How will the lack of full involvement by all the water providers impact on the ability to implement the plan.  Part of the proposed plan sees using Black Mountain Irrigation District (BMID) infrastructure to manage withdrawals from Mission Creek (Alternative 4, page 3-27).  How can this be implemented if BMID is not involved?  Will additional infrastructure need to be built to operate things in the mean time until BMID is brought on side?  How much will that cost?  Or, without BMID, might it be cheaper to avoid using Mission Creek for now and install the wells originally envisioned to deal with water issues in SEKID?

2) Mission Creek

Mission Creek is a ‘Fully Recorded’ water source, which means that the province will not issue new licences on the creek.  This is because the reliable supply on the creek is not seen as sufficient to supply extra licences.  The city has three relatively small irrigation licences on the creek.  BMID has by far the largest licence volume on the creek, and they are not part of the plan.  The city would need to have new waterworks licences on Mission Creek to be able to withdraw water from the creek, and as presently classified, the province will not issue new licences.  The value planning exercise did not address these issues.  It was not part of the mandate.  From the report:

The VP Study was to specifically focus on the technical solution without regard to
system Governance. Further, the technical solutions were not limited based on any
ownership or rights to existing systems (page 1-3).

This means that there are important legal and governance issues that need to be resolved before this plan can be implemented.  Or, there may be legal and governance issues that mean this plan cannot be implemented.

3) Climate Change

Climate change is widely recognized as the single greatest unknown for future water supply planning. Potential impacts include, increased growing seasons in the shoulder months, precipitation falling more as rain rather than snow in the uplands, increased irrigation requirements (both domestic and agriculture), increase in extreme events (both drought and flooding), and possible reductions in mean streamflow (page 3-41).

The projections for the Okanagan are for an earlier freshet, a longer low flow period, and a lengthened season when plants need water.  There are kokanee that spawn in Mission Creek during that low flow period, and they need water.  It would seem that before moving forward with construction that anticipates relying on Mission Creek, it would be important to develop some forecasts of how much water Mission Creek can reliably supply into the future.  There has been some work done related to this issue by people at the Pacific Agricultural Research Center and by the Okanagan Basin Water Board.  Such work was not mentioned in the report.  What information is available for Mission Creek needs to be consulted, and the risk that Mission Creek cannot be relied upon needs to be fully quantified.  If the risk is large, then the projected cost savings are a gamble, rather than a sure thing.  Since the up front costs of starting down this path are high, if the dice do not fall in our favor, we will have spent money that we cannot recover.

4) Agriculture

Protecting the interests of agriculture was recognized as an important part of the value planning exercise, and the suggestion of separating agricultural supply from domestic supply makes sense.  How will this be governed?  The present governance has some challenges, and there is potential to improve things.  Based on information in the 2012 integration plan, the three irrigation districts presently supply more water to domestic customers than their licence volume permits.  They have agricultural and domestic licences, and while their supplied water is below the sum total of their licence volume, the amount going to domestic uses exceeds that licenced for domestic purposes.  This presents a challenge for agricultural water users, as water is ‘seeping’ out of agriculture into domestic water uses.  If agricultural water licences are vested in a body that is independent of the city, managing a separate delivery system and/or contracting with/to the city for the types of resilience issues mentioned in the report, then the result may be good for agriculture.  However, if this amounts to a capture of almost all the water rights in the Kelowna area by the city, then agricultural users are likely to be a lower priority to the city.  Agriculture is an important use of the land and a valuable contributor to the quality of life here in Kelowna.  However, it is a relatively small economic contributor, relative to those activities related to the continued growth of the city (construction, real estate, etc., see this post).  Integrating the water providers in the city makes it easier for development, as all major infrastructure decisions related to development are made by one local government.  This is a benefit for some that is independent of doing anything to address water quality issues.  However, that comes at the cost of removing a structure which gives agriculture a larger voice relative to the other interests trying to get the ear of local government.

5) Governance

A theme that runs through the points I raise above is governance.  Negotiations between nations, between business partners, and between domestic partners take time, and are successful when all parties feel that they are better off by being part of the deal than not.  Deals that are rushed often do not work.  This process was entered into and the timeline set by the opportunity to access infrastructure money available from the federal and provincial governments.  The sense was that if things were not done quickly, then that money would be gone.  This likely contributed to the reason that three water providers backed out.  Their situation was such that there was no urgency to address water issues in their system immediately.  SEKID had the most significant water issues to deal with, and therefore felt unable to wait for an arrangement that was acceptable to all the water utilities.  The result is a plan that cannot be implemented until the other parties do come on board, and if those other parties move forward with works that are inconsistent with the plan, the projected cost savings may not be realized.  Likewise if it takes a long time to bring everyone together, then the cost savings of the proposed plan will not materialize for some time, and therefore the benefit of spending more now, rather than using the wells originally planned, becomes smaller.

The plan speaks to the issue of dealing equitably with the disposal and rationalization of the assets held by each water provider.  This is important.  Those served by the different water providers have paid, through their rates, for those assets.  If the utilities are merged and assets disposed of, then it would seem fair that those who paid for the assets be compensated.  Perhaps these issues should have been agreed to up front, rather than as an afterthought.  It is good that the value planning report talks to them, but perhaps the negotiation between the water providers should have started with the governance issues.  I.e., perhaps we should have figured out how we are all going to work together before talking about what we are actually going to do together.

In sum, the value planning exercise has identified a potentially cost effective way that an integrated Kelowna water system could be organized.  This is a valuable outcome from the process.  However, there remain a number of outstanding issues, some of which include: the capacity of Mission Creek to actually supply the water anticipated in the plan, in the face of a changing climate and environmental needs; the requirements for bringing the three providers that were not part of the plan back on side so that the plan can actually be implemented; identification of a practical way to ensure that agricultural water users are able to manage water for their purposes; and a plan to fairly deal with the merger of these multiple independent entities together.  Hopefully we have not being rushed to the chapel for a shotgun wedding before really figuring out the practicalities of living together.